The Loan Market Association (LMA) published an exposure draft of a reference rate selection agreement (RRS Agreement) on 25 October 2019. The reason for producing this is that there is no protocol system for amendments of syndicated loans (unlike e.g. ISDA). The RRS Agreement is intended to provide a consistent process for agreeing amendments to legacy syndicated loans to cater for LIBOR transition, rather than a different approach being taken on each transaction.
The RRS Agreement does not itself effect the amendment of the facilities agreement. Rather, the parties agree the headline commercial terms (which are set out in a simple tick box "selection sheet") and the lenders authorise the Agent and the Obligors to enter into a separate amendment agreement to effect the amendments. This is anticipated to streamline the process as only the Agent, and not each lender, would have to sign the amendment agreement itself.
In the introduction to the RRS Agreement it is mentioned that instead of the two stage process envisaged by the draft, a single amendment agreement could be entered into to effect the amendments. Alternatively it is suggested that a further agreement might not be necessary and users could simply deem the amendments to be made to the relevant facilities agreement in accordance with the RRS Agreement.
The selection sheet in the RRS Agreement cross refers to the relevant provisions in the new exposure drafts of SONIA/SOFR linked syndicated loan agreements produced by the LMA back in September. As stated in our previous article, these drafts contained a number of blank placeholders and optional provisions and some significant points of principle would need to be resolved before they could be used on a transaction. As with the exposure draft facilities agreements, the RRS Agreement is a useful starting point but would be unlikely to be used until these issues are resolved.